Inflation and Its Types

Topics: Inflation, Supply and demand, Money Pages: 2 (676 words) Published: October 12, 2011
* What is inflation?
In economics inflation is defined as the rise in general level of prices of goods and services an an economy over a period of time.When the general price level rises each unit of currency buys fewer goods and services.Consequently inflation also reflects an erosion in the purchasing power of money-a loss of real value in the internal medium of exchange and unit of account in the economy. * What are the types of inflation?

1. Types of inflation on coverage:
* Comprehensive inflation:When prices of all commodities rise throughout economy it is known as comprehensive inflation. * Sporadic inflation:When prices of few commodities in few regions it is knon as sporadic inflation.It is sectional in nature eg rise in food prices because of bad monsoon in a region. 2. Types of inflation on government reaction:

* Open inflation:When government does’nt attempt to restrict inflation it is known as open inflation.In a free market economy where prices are allowed to take their own course open inflation occurs. * Suppressed inflation:When government tries to control inflation it is known as suppressed inflation.Suppressed inflation leads to corruption,black marketing and artificial scarcity. 3. Types of inflation on rising prices:

* Creeping inflation:When prices are gently rising it is referred to as creeping inflation.It is the mildest form of inflation. * Chronic inflation:When creeping inflation continues for a longer time it is often called as chronic or secular inflation.It is called chronic inflation because if creeping inflation continues for a long period of time without any downturn it can lead to hyperinflation. * Walking inflation:When prices rise by more than 3% per annum but less than 10% per annum it is termed as walking inflation. * Running inflation:When there is a rapid increase in the rate of rising prices running inflation occurs.If the prices rise by more than 10% per annum then...
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